RPT-Fitch Affirms China's Want Want at 'A-'; Outlook Stable
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April 25 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed Want Want China Holdings Limited's (Want Want) Long-Term Issuer Default Rating (IDR) at 'A-'. The Outlook is Stable. Fitch has also affirmed Want Want's foreign-currency senior unsecured rating and the rating on wholly owned subsidiary Want Want China Finance Limited at 'A-'.
The affirmation reflects Want Want's strong 2013 performance with sales growth of 13.7%, a stronger EBITDA margin of 25.3% and enhanced net cash position of USD802m. Want Want continued to be the dominant player in niche packaged food markets in China with strong operational and execution capabilities and prudent financial position.
KEY RATING DRIVERS
Dominant Position, Niche Products: Want Want is one of the most recognised packaged food brands in China. Its key products - rice crackers, flavoured milk and soft candies - dominate their respective niche product markets in China. Its rice crackers, for instance, are traditional snacks eaten during the Lunar New Year and demand surges ahead of the festival.
Management estimates that its market shares for key products range between 30% and 70% of the Chinese market. Fitch notes that these estimates may be different if the product categories are broadened. The agency, however, acknowledges Want Want's dominance, as evidenced by its significant pricing power, and its ability to defend its margins despite continuous increases in raw material prices and labor costs in China. The company has kept EBIT margins well over 15% during the last five years while maintaining a compound annual growth rate (CAGR) of 22.2% for sales.
Extensive Distribution Network: One of Want Want's key strengths that cannot be easily replicated is its nationwide exclusive distribution network of over 350 sales offices and around 8,000 distributors. The company uses this network to expand its sales in Tier 3 and 4 cities and the modern organised retail route for growth in Tier 1 and 2 cities. Want Want in 2013 restructured its sales force into nine product divisions and divided China into 2,811 clusters, which would help the company advance market segmentation, respond rapidly to changes in demand patterns and further drive sales. Continuación...